Europe Fintech Scene: Paris vs London – who wins?

The competition for the top tech spot is fierce in Europe right now. The Parisian start-up scene has been growing drastically in the last few years, but the advantage remains with London which is already celebrating a record year for investment in 2017. There are two reasons for Paris to challenge London’s lead: the winning combination of a successful Fintech universe with highly qualified professionals moving from the City Of London; and the entrepreneurial spirit which makes it a magnet for international talents and investors.

The Paris tech scene has done remarkably well in 2016, almost catching up with London with a record €2.9 billion invested in the French-Tech (+80% yoy) versus €3.5 billion for British start-ups. Government policies and investments in infrastructure paid off: the bureaucracy around setting up companies has been simplified, generous tax breaks on R&D drove down the cost of labour in the tech sector, and the BPI (Banque Publique d’Investissement) a mostly government funded investment fund invested approximately 2 billion in start-ups over the last few years. Last but not least, billionaire Xavier Niels has been an excellent PR for promoting Paris, and he opened the world’s largest incubator:Station F last year. As expected, this significant effort favoured a huge wave of young local entrepreneurs, and 2016 was their coronation year.

The London tech scene, on the other hand, is more mature than Paris as demonstrated by the valuations of successful exits in 2016, £41 billion in the UK versus €3 billion in France. The success of London is built on two pillars: first, the City of London with its technical complexity and its huge international talent pool. The investment and finance industry has been in constant change and restructuring during the past 9 years. This has created opportunities. In 2016, 22% percent of investments in British start-ups were made in the Fintech sector versus 7% in France. This is just the tip of the iceberg as many professionals move on from the financial sectors to tech start-ups operating outside of the Fintech industry. The second pillar is the SEIS program offering huge tax reliefs to angel investors. The second pillar is the SEIS program offering huge tax reliefs to angel investors and hence making it easier to get a first seed in start-ups. As of 2016, the UK had 16,000 registered angel investors versus 8000 in France.

It’s fair to say that the French way is substantially based on government investments, the BPI alone accounts for about 25% of investments in French Start-ups. The British system, as described above relies more on incentivising private investors with significant tax relief; a minimum of 50% of the money invested and when remaining invested for 3 years no capital gain tax. Both amount to the government providing a financial boost but each lead to different outcomes. This is not new, French capitalism has always worked this way, and the government has always seen the return on its investments with a high number top-notch global companies. On the downside, capital gain taxes (among others) are higher in France than anywhere else in Europe, and from a foreign entrepreneur perspective, getting into the public investment programmes requires networking, understanding of the bureaucracy, administration, and local culture even though you can apply in English. In other words, a foreign entrepreneur coming to France meets the inconvenience first and the advantages later. For as long as we live in an open world, I believe these drawbacks will always give London the edge over Paris.

To conclude the Paris vs London debate: the key to success is in international talent. London wins for now.

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With the decorations up, the last order date for Amazon nigh and most of us looking forward to at least a few days break, it’s always a good time to take stock of what’s been achieved over the last 12 months.

For AlgoMe this has been another exciting year.

January started in style with the launch of the AlgoMe Careers mobile app – giving professionals the opportunity to find their next career opportunity on the move.

Then in July we released our Industry Pulse Report – a check on what the industry was thinking about key topics such as Brexit, Pay Gap Reporting, MiFiD II and GDPR. Unfortunately it seems that the uncertainty that the industry was feeling due to Brexit is unlikely to have receded in the intervening period, but it’s good to see progress starting to be made in other areas such as gender and diversity.

In September we launched AlgoMe Community – a place for the Investment / Asset Management industry to come together, providing professionals with ways to grow their knowledge, profile and network. We’d like to say a big thank you to all of the members that have joined and contributed and look forward to continuing growth in 2019.

In November AlgoMe joined the Investment Association, becoming a Fintech member and working closely with Velocity, the Association’s new Fintech accelerator. This is a really exciting initiative and we’re looking forward to doing more with Velocity in the near future.

We also launched our Mentoring matching service in November – designed to help AlgoMe Community members connect with the best individuals within the community to help them to reach their career goals using a simple but intelligent process. If you haven’t already signed up to be a mentor or a mentee, please do spend 5 minutes now and tick off a New Year’s Resolution early.

As we go into the end of the year, we have also launched our survey on Investment Management, Fintech and the future of careers. The impact of Fintech on the industry is going to accelerate rapidly in 2019, but what has been less well documented is the impact on individuals, their careers and the skills they’ll need to succeed in a more digitised environment. We really value the input of our community members, so please spend a couple of minutes filling out the survey and we’ll make sure you’re the first to hear the results early next year.

From me and the AlgoMe team, I wish you all a very happy holiday season and look forward to another year of exciting announcements and change in 2019.

Rob

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I have always struggled to see a fair reason why employers should be allowed to ask about a potential hire’s current remuneration, other than to give them an advantage in pay negotiations.
It’s something which can only exacerbate existing pay inequalities and it’s abolishment can surely only be a positive thing.
Here the Guardian argues specifically about its impact with regards to the gender pay gap:
https://www.theguardian.com/commentisfree/2018/aug/23/gender-pay-gap-current-salary-question
I believe this has already been outlawed in some US states?
@Jonathan Max - would be interesting to hear the view from HR.

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The Investment Association recently gave the industry a boost when it announced the launch of Velocity, its FinTech accelerator. Designed to identify, develop and accelerate best in class firms with innovative solutions, Velocity will champion and facilitate the wider adoption of technology across the industry.

And AlgoMe will be involved in this too, which is why I’m excited to announce we are now a member organisation of the Investment Association as an official FinTech member and have been named a "company to watch" by Velocity.

Challenging Times
The Investment Management industry faces major challenges and opportunities from forces such as digital technology, pressure on fees and increased regulation, while at the same time there are widespread changes in the workforce and their expectations.

To date, Investment Management has both been fairly insulated from the challenges posed by agile FinTech competitors, but also distant from the opportunities offered by the new technologies and ways of thinking that such companies bring.

Bringing FinTech closer
Velocity is a fantastic step towards accelerating the adoption of FinTech. It has received support and endorsements from both inside and outside the industry, including from the Chancellor of the Exchequer, Phillip Hammond, who was enthusiastic about the initiative at a recent City event.

To drive change and innovation, the industry needs to connect across different disciplines and areas of expertise, driving new ways of thinking and fostering cultural change.

Without the benefit of emerging FinTechs and their external expertise, it will be hard for incumbents to harness the benefits of emerging technologies such as Straight Through deal Processing (STP), Distributed Ledger Technology (DLT), and Artificial Intelligence (AI) in areas such as risk and compliance, securities trading and investment decision making.

Our Mission
AlgoMe's mission is to connect the Investment Management industry and empower professionals to manage their careers. Our new product, AlgoMe Community, is placed to become the hub for the discussion between FinTechs and the companies and professionals in the wider Investment Management ecosystem.

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The event will be focused on data, operations, blockchain, compliance, legacy, regulation and AI.

European FundTech Lab London, Spring 2019
WWW.EVENTBRITE.COM
Funds Europe in conjunction with Amundi Services, Calastone, Metrosoft, Milestone Group and Oracle will be hosting the fifth European FundTech Lab forum which will be taking place in London on Thursday, 16 May 2019...

The adoption of FinTech will bring significant changes for the future of Investment Management - from which products are offered to clients and how they are delivered, to the overall structure of the Industry itself. This level of disruption will also impact the future careers of the individuals working in or entering the Industry today.

According to the European Fund and Asset Management Association (EFAMA), there are 610,000 professionals employed directly or indirectly across Europe in the Investment Management ecosystem, with over 100,000 in the UK. Which of these roles could disappear over the next couple of years, where are the opportunities and how should you navigate the disruption?

In our latest report, The Disrupted Career: FinTech, Innovation and the Future of Careers in Investment Management, we explore how FinTech is changing careers across the industry, and how professionals are being impacted by and are responding to these changes.

DOWNLOAD THE REPORT

Disrupted Career Paths

Our report found that very few areas within Investment Management will not be impacted by technological change; the career paths of the future will be radically different.

Professionals will need to embrace a more flexible approach to career planning. In addition, future job growth and progression opportunities will be concentrated in FinTech and in roles driving innovation in existing Investment Management functions.

Will We All Be Coders?

Many professionals will need to develop more technical skills, and not just in traditional technology roles. Even where ‘hard’ skills around coding, AI and data science will not be important, there will be an expectation that professionals will have a more holistic view of how technology underpins the business.

However, this will not negate the importance of soft skills, and blending skill-sets will be critical for the most successful teams and individuals.

With the industry expecting strong growth with a target of doubling of AUM over the next decade, those who position themselves to embrace the coming changes can look forward exciting opportunities.

Welcome To The AlgoMe Report On FinTech, Innovation And The Future Of Careers In Investment Management

This report aims to address key questions that are important to everyone working in or looking to join the Investment Management Industry.

How significant will the impact of FinTech be on career paths?
How likely is my current role to be affected?
Where are the opportunities in this disruption?
How can I best position myself for future success?
We asked a panel of Investment Industry professionals their views.

The full report is available for download to all AlgoMe Community members. Not already joined? Becoming a member takes less than a minute.

The FCA has now recognised the increased use of big data and AI across the Investment Management and banking value change. It is aiming to better understand the impact it has and will have, the benefits and harms and implications for regulation. One of their focus points in their 2019 Research agenda on the theme of technology, big data and artificial intelligence (AI) is the economics and ethics of this theme.

The economics of the use of big data and AI in general are already quite well understood. They have changed the way of doing business and generating value enormously. Industries have been and continue to be disrupted; examples like Amazon, Apple, Facebook, Uber and even Microsoft have shown how the philosophy of platforms has moved us from single supplier mentality to open marketplaces. These places where producers and consumers come together in interactions that create value for both parties, whether it is peer to peer or direct to consumer and disrupt the existing status quo.

Platforms are not an entirely new phenomena as it has existed already in traditional open air market places around the world or for example in stock markets. What is new, is the addition of digital technology enabling platforms to enormously extend their reach, speed, convenience and efficiency.

I would argue that the real impact of big data and AI has not hit Investment Management yet. Yes, there is robo-advice providing digital financial advice based on mathematical rules or algorithms (examples like Nutmeg). The majority of them however have been struggling to make their platform economically viable and according to a Deloitte report robo-advisers would need around £6bn assets under management to generate enough revenues to cover their costs. Nevertheless, also Investment Management is at the start of using big data, blockchain/ Distributed ledger technology and natural language processing. The benefits are seen already in better informing (investment) decisions, driving operational efficiency and fraud prevention and compliance.

Arguably lesser known are the potential ethical impacts that will be associated with the use of these technologies while companies move from the traditional commercial yardsticks to include ethical and value-based decision making.
The established players like Facebook and Alphabet (through the accusations of distributing fake news), Uber (sexual harassment and leadership style), AirBnB (destroyed properties from their users), have and continue to show that the ability to embed ethical awareness and decision making across functions will emerge to be a key attribute of successful digital organisations. The Investment Management industry is to be warned.

Governments are stepping up (the FCA research agenda aims at looking at the implications on regulation) and, for example, GDPR is a first step. Nevertheless, the industry should not be waiting for governments and regulators to step in. I would argue that especially in an industry like Investment Management which is based on trust, companies that put ethics and morality front and centre of their organisation and especially with regards to big data and AI, are more likely to engender the trust of customers and differentiate themselves from competitors in the market.

So what are the ethical questions ‘big data and AI’ that should be asked?

Can artificial intelligence exacerbate, hide and create unintended biases?
Do network effects reduce competition and, in turn, impact consumer choice?
How can we be accountable for big data?
How do we define big data?
How do we adjust risk management frameworks?
What are the benefits and, more importantly who will benefit and who might be at risk by this?
According to Charles Ellis, CFA, and chair of the Whitehead Institute, Cambridge, Massachusetts, the “biggest challenge” with regards to ethics for the investment management industry is to “find the pathway to reassert the dominance of the profession over the business”; an inherent conflict of interest in the Investment Management business as they are supposed to deliver financial performance both to their owners and their clients.

Regulation is in the end already in place and leaves little room for ambiguity ie to treat the clients in a fair and ethical way with the general principle to always put the clients’ interest first (AIFMD, UCITs IV and MiFID II).

It is up to the industry now to ensure that these principles are followed and embedded when using big data and AI. There is no magic pill for it yet, but the market shapers and early adopters will show how easy or difficult this might be.

The FCA published last week it's Research Agenda for 2019 (2019 fca-research-agenda.pdf). Their focus will be on
household finance and consumer behaviour
household finance and consumer behaviour
securities markets: microstructure, integrity and stability
competition, innovation, and firm behaviour and culture
technology, big data, and artificial intelligence
regulatory efficiency and effectiveness
The 3rd objective seems to bring the discussion previously focussed on pricing in general to the more sophisticated pricing which increasingly uses technology and big data to set prices, and often use predictive analytics to personalise prices.

The 4th objective aims to better understand how the developments in technology, big data, and artificial intelligence are shifting market economics, the resulting benefits and harms and implications for regulation.

All this with the aim to ensure that their regulatory interventions achieve their objectives of making efficient use of their and industry’s resources. From an external perspective, they want to achieve a regulatory regime that promotes and supports effective financial markets while minimising their costs to society.

I am looking forward to their research outcomes and the future regulations that is designed on the back of it